The Two Faces of Orange: Innovator & Startup Killer

A few weeks back, Orange made a few big announcements, most of which put them in the ‘oh shit’ category, instead of the ‘startup killer’ category. The ‘oh shit’ title came from their launch of Libon, a cross-platform phone-calling, texting, and communication app that runs off of the 3G network – theoretically, this app is the kind that startups build to kill companies like Orange, and Orange built it in-house. They also announced a new partnership with Facebook, inaugurated by the veritable Sheryl Sandberg (COO of Facebook), in which they would release an app, Party Call, allowing Facebook friends to have group video calls.

Orange: Startup Killer

You see, companies like Orange have had a pretty bad reputation in the past, especially in the startup ecosystem in France – essentially, they are where startups go to die. These companies are former monopolies from the hay-day of French tech, awkwardly coinciding with the time where there was only one company in each sector, with France Telecom (owner of Orange) being the Telecom company. Orange currently owns 100% of the not-quite-YouTubeDailymotion – they acquired the remaining 51% in June of this year after having purchased 49% ownership just a year earlier, and are currently looking to offload it to an American company, according to some sources.

Orange: Startup Innovator

This reputation took a harsh turn in November as Orange, who had seemingly taken the same old ‘corporate incubator’ ‘accelerator sponsoring’ route that so many lazy French tech companies have taken, announced these new partnerships. Not only is Orange getting in front of the inevitable shift away from per-minute and per-SMS billing plans by getting a cross-platform plan that relies purely on data, but they are partnering with the most popular social network in the world (and in France) to bring their customers what they may or may not want.

In short, they redefined themselves as a force to be reckoned with

Orange: Startup Killer

Yet, it all seemed to good to be true, as TechCrunch rolled out their first “Orange stole our app idea” story just two weeks after the announcement. The story came from SF-based Telesocial, who said that after discussing with Orange this past Summer, revealing their technical layout – a risk that startups must often take to play with the big dogs – “talks fall apart at a late stage after the two could not come to terms over exclusivity,” reported Ingrid Lunden. After the launch Telesocial has filed a cease and desist letter, saying that they have claims to the name “Party Social,” and preparing a bigger case against Orange.

Just three days ago, JDN reported that another startup, this time French startup MobileGlobe, was also accusing France Telecom of stealing their idea (on an unrelated note: leave it to a French startup to copy a U.S. startup in getting their idea stolen – ugh). It seems that, at the same time the France Telecom was negotiating with MobileGlobe, who offered a similar product. CEO Yoann Valensi says that he had handed over his entire source code, believing that by signing the NDA, he had entered into a partnership with France Telecom – he, of course, is mistake, as Xavier Perret responded in the article with a simple “Faux.”

Orange: Startup Innovator

The silver lining of the whole story is that, the reason Telesocial could not agree on exclusivity negotiations with the mobile operator was because they were already in discussions with other operators. Telesocial said that, because of the scandal with France Telecom, they are receiving increased interest from other operators – Orange’s theft was just the product validation they needed to spark interest by competitors.

The MobileGlobe CEO said he is also seeing the same thing, but somehow I think we’ll hear more about Telesocial in the coming months that MobileGlobe.

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Comments (3)

This is a very sad affair. As a member of Saint-Gobain NOVA team, trying to generate partnerships between startups and our business units, this may hurt us, even if we are more in the Cleantech/Materials sector, by increasing corporate fear in entrepreneur’s minds.

On a day to day basis, we have to fight this stereotype of the big corporate taking advantage of the small startups. Most investors say that no corporate (at least, in Europe/US) in its right mind would deliberately steal IP from a startup – reputation damages, even more than legal, would be terrible. However this fear is always present in entrepreneur’s minds, and it is true that without a team dedicated to make sure the process is right (my job), problems can happen – example: when corporate team 1 meets a startup, not aware of corporate team 2 developing a similar product.

So, to come back to this specific case, which I know nothing about, Orange may have played a really dumb game, but it is also possible that they have not enforced best practices as we try to do. We (corporate) need to go well beyond the legal obligations and over-communicate to the startup.

At Saint-Gobain, we disclose the existence of potentially-competing internal projects (without details) to the startup before meeting them. They can decide not to meet us, but on the other hand, if the startup is still willing to engage, they see it as a proof of our interest in that particular field. Also, we don’t sign NDA if it is too difficult to explicitly define and separate the prior art of both parties – ie if we feel that we already know part of the entrepreneur’s invention. The entrepreneur, if he still wants to engage, should be able to demonstrate the performance/novelty without giving confidential explanations. In general, we make sure that the IP of BOTH parties is well protected.

In practice, having a corporate team, with strong top-management support, not belonging to any particular business, dedicated to make sure that the communication is smooth and the rules are respected, helps enormously.